Pharma’s top U.S. execs haven’t been shy about expressing their desire for tax reform—and now, they’re taking those wishes directly to Congress.
Tuesday, 16 CEOs of major American companies—including Pfizer’s Ian Read, Eli Lilly’s David Ricks, Merck’s Ken Frazier and Celgene’s Mark Alles—put forth a letter to congressional leaders recommending a “comprehensive pro-growth” overhaul to the U.S. tax code, which they called a “major impediment to economic growth.”
The way they see it, lowering rates and enacting other changes proposed by Reps. Paul Ryan, R-Wis., and Kevin Brady, R-Texas, would “free up much-needed capital for companies to invest here in the U.S." and “help stop corporate inversions and acquisitions of U.S. companies.”
Read, for one, speaks from personal experience. After all, he was plenty vocal in dissing the U.S. tax code—which he said disadvantaged Pfizer in competition against its international peers—before attempting his own inversion move, a $160 billion Allergan deal that the U.S. Treasury quashed last year.
And Merck, Lilly and Celgene have already jumped at the chance to make their voices heard since the new administration took over. Frazier, Ricks and Celgene chairman and former CEO Bob Hugin, along with a slew of other industry leaders, met with President Donald Trump last month, promising new American hires if tax reform takes shape.
It's not hard to see why U.S.-based pharma execs may be eager for a change. Aside from the higher corporate tax rates they say they pay compared with many of their rivals, they also aren't too keen on the penalties they have to pay to repatriate foreign earnings, which leave some companies—Pfizer included—with a wealth of potential M&A funds trapped overseas.
Johnson & Johnson chief Alex Gorsky, though, has warned that pharma may not like all the changes that come its way if the tax code does get a revamp.
“There are going to be some things that all of us really like that are likely going to go away,” and “there’s going to be other things that we don’t necessarily like that may be introduced" in a new set of tax rules, he cautioned at the J.P. Morgan Healthcare Conference. “... At the end of the day it could mean for a company like Johnson & Johnson—and I would dare say others—that your tax rate could go up marginally.”